Trump Picks a Reinvented Warsh to Lead the Federal Reserve (6)

Donald Trump named Kevin Warsh to be the next chair of the Federal Reserve, ending months of speculation over who’d take charge of US interest rates as the president pushes for big cuts.

Trump elevated Warsh, who’s advised him on economic policy and previously served as a Fed governor, to succeed Jerome Powell when his term at the helm ends in May. It marks a comeback for Warsh, 55, who’s called for a major overhaul of the Fed but was passed over for the top job in 2017 when Trump opted for Powell.

If confirmed by the Senate, Warsh will take the reins at a time when many economists and investors see the Fed’s traditional insulation from elected officials as being under threat from the White House. Warsh aligned himself with Trump in 2025 by arguing publicly for lower rates, going against his longstanding reputation as an inflation hawk.

“I have known Kevin for a long period of time, and have no doubt that he will go down as one of the GREAT Fed Chairmen, maybe the best,” Trump wrote on his Truth Social platform. “On top of everything else, he is ‘central casting,’ and he will never let you down.”

Speaking to reporters later Friday, Trump — who’s repeatedly blasted the Powell Fed for not lowering rates fast enough — said he had not asked Warsh to commit to cuts.

“No, but we talk about it, and I’ve been following him, and I don’t want to ask him that question,” Trump said. “I think it’s inappropriate, probably.”

Kevin Warsh, former governor of the US Federal Reserve.

Photographer: Tierney L. Cross/Bloomberg

The dollar held gains and US stock futures remained lower after Trump confirmed reports he would pick Warsh. Despite his recent backing for rate cuts, traders see Warsh as ultimately more inclined to guard against rising price pressures given how much he worried about rising inflation when at the Fed.

“The two big questions are who’s the real Kevin Warsh and does that evolve?” said Michael Feroli, chief US economist at JPMorgan Chase & Co. “I presume at the outset he is going to be dovish, but does that persist as we move forward a year or two or more?”

Warsh is currently an adviser at Stanley Druckenmiller’s Duquesne Family Office, a fellow at the conservative Hoover Institution think tank and a lecturer at Stanford Business School.

In a months-long selection process, Warsh ended up prevailing over fellow finalists Christopher Waller, a current Fed governor; Kevin Hassett, the National Economic Council director; and BlackRock Inc. executive Rick Rieder. Trump lauded those three in a post saying “they all would have been outstanding, and have a great and unlimited future with “TRUMP.”

Warsh’s Senate confirmation may also be complicated by a recently-announced Department of Justice probe into the central bank. On Jan. 9, the Fed received subpoenas regarding Powell’s 2025 congressional testimony about a building renovation project. Powell issued an extraordinary videotaped statement decrying the probe, and several Republican lawmakers came to the central bank’s defense.One of them, North Carolina’s Thom Tillis, pledged to withhold support for any Fed nominee until the legal matter was settled.

Following Trump’s announcement on Friday, Tillis said on social media that he saw Warsh as a “qualified nominee with a deep understanding of monetary policy.” However, he made clear he would not back Warsh’s nomination “until the DOJ’s inquiry into Chairman Powell is fully and transparently resolved.”

Tillis is a member of the Senate Banking Committee, which will vet the nomination. Tim Scott, who chairs that panel, said he looks forward to “leading a thoughtful, timely confirmation process.”

Trump shrugged off the potential confirmation hurdle.

“If he doesn’t approve, we’ll just have to wait till somebody comes in that will approve it, right?” Trump said of Tillis. The senator’s term ends in January 2027 and he’s not running for re-election.

Mixed Reaction

Warsh won a prominent overseas endorsement Friday morning from veteran central banker and current Canadian Prime Minister Mark Carney. He’s “a fantastic choice to lead the world’s most important central bank at this pivotal moment,” Carney said in a post.

High profile Wall Street chief executives also lauded the pick, including JPMorgan’s Jamie Dimon, Wells Fargo & Co.’s Charles Scharf and Paul Taubman at PJT Partners Inc.

Reaction from economists was more mixed.

“I think the president had a range of better choices and he picked the worst one in front of him,” Neil Dutta, head of economics at Renaissance Macro Research, said in an interview on Bloomberg Television. “I think his newfound dovishness looks very suspicious.”

During his time at the Fed, Warsh was consistently wary of inflation and often supported higher interest rates. Last year, however, he echoed Trump’s view that rates could be significantly lower. A willingness to cut rates is seen as a litmus test for the next chair, worrying Fed watchers that this would undermine the central bank’s independence.

Warsh’s selection doesn’t guarantee a change in policy at the Fed. Interest rates are set by a majority vote of the 12-member Federal Open Market Committee, which is composed of seven Fed governors and five of the 12 presidents of regional Fed banks. The FOMC held its benchmark rate steady this week after lowering it three consecutive times at the end of 2025, and rates remain well above where Trump has said he wants them.

‘Breaking Some Heads’

Trump has been at odds with Powell almost since the current Fed chair took the helm in 2018. In 2020, the president lamented selecting Powell over Warsh for the position: “Kevin, I could have used you a little bit here. Why weren’t you more forceful when you wanted that job?” he said at the time.

Warsh has advised Trump on economic policy as far back as his first presidential campaign. Since leaving the Fed, Warsh has frequently criticized the institution, saying recently it needs a regime change and proposing a plan for lower interest rates.

“It’s about breaking some heads, because the way they’ve been doing business is not working,” Warsh told Fox News in July.

Warsh was appointed to the Fed’s Board of Governors by President George W. Bush in 2006 after stints in the Bush White House and, before that, on Wall Street. While he wasn’t widely known when he joined the central bank, his experience and contacts in financial markets and in the banking world proved pivotal during the 2008 financial crisis.

His appointment made him the youngest person to ever serve as a Fed governor, and among the richest. He is married to Jane Lauder, the daughter of prominent Republican donor Ronald Lauder — the son of makeup scion Estee Lauder and a former Wharton School classmate of Trump’s. Lauder donated $5 million in March to MAGA Inc., Trump’s super political action committee.

Warsh resigned from the Fed in 2011 shortly after it embarked on a second round of bond purchases to shore up a crisis-scarred economy. He has since been critical of the Fed’s balance-sheet expansion, and now argues that by more aggressively reducing the size of it, the central bank would also be able to cut interest rates more.

That openness to lower rates marks a change for Warsh, who was once so cautious about inflation that he called for higher rates even in the depths of the financial crisis.

While the Fed delivered three quarter-point interest-rate cuts last year — in September, October and December — Powell said on Wednesday there was broad support this week for leaving rates unchanged amid signs of some stabilization in the labor market.

Bets in futures markets show investors expect rates to drop to about 3% by the end of 2026, from the range of 3.5-3.75% where they are now, still far above where Trump would like them.

--With assistance from Simon Kennedy, Maria Eloisa Capurro, Steven T. Dennis, Yizhu Wang, Hannah Levitt, Todd Gillespie and Kate Sullivan.

To contact the reporter on this story:
Catarina Saraiva in Houston at asaraiva5@bloomberg.net

To contact the editors responsible for this story:
Matthew Boesler at mboesler1@bloomberg.net

Kate Davidson, Ben Holland

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